<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1997
Commission File No. 0-24676
CARACO PHARMACEUTICAL LABORATORIES, LTD.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2505723
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1150 ELIJAH MC COY DRIVE, DETROIT, MICHIGAN 48202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 871-8400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Common Stock outstanding at August 10, 1997: 7,842,106 shares
The Exhibit Index is located on page 15
The total number of pages is 17
<PAGE> 2
CARACO PHARMACEUTICAL LABORATORIES, LTD.
BALANCE SHEET (UNAUDITED)
JUNE 30, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents.........................$ 61,470
Accounts receivable, net of allowance of $30,000.. 155,005
Inventories....................................... 387,160
Prepaid expenses and deposits..................... 93,448
-----------
TOTAL CURRENT ASSETS................................ 697,083
-----------
PROPERTY, PLANT AND EQUIPMENT - AT COST
Land.............................................. 197,305
Building and improvements......................... 6,682,724
Equipment......................................... 3,573,278
Furniture and fixtures............................ 156,909
-----------
Total............................................. 10,610,216
Less accumulated depreciation..................... 2,501,540
-----------
PROPERTY, PLANT AND EQUIPMENT, NET.................. 8,108,676
-----------
MARKETABLE SECURITIES............................... 34,174
-----------
TOTAL ASSETS........................................$ 8,839,933
===========
</TABLE>
See accompanying notes.
2
<PAGE> 3
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
CURRENT LIABILITIES
Accounts payable....................................... $ 1,564,877
Short-term demand notes (Notes 3 and 4)................ 2,690,000
Current portion of long-term debt (Note 4)............. 8,880,000
Accrued expenses:
Interest............................................. 978,528
Other................................................ 179,870
-----------
TOTAL LIABILITIES........................................ 14,293,275
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT....................................
Preferred stock - no par value; authorized 5,000,000 shares;
issued and outstanding, 285,714 Series A shares...... 1,000,000
Common stock, no par value, authorized 20,000,000 shares;
issued and outstanding, 7,842,106 shares............. 19,646,974
Accumulated deficit.................................... (26,100,316)
-----------
TOTAL STOCKHOLDERS' DEFICIT.............................. (5,453,342)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT.............. $ 8,839,933
===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
CARACO PHARMACEUTICAL LABORATORIES, LTD.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ ----------------------------
1 9 9 7 1 9 9 6 1 9 9 7 1 9 9 6
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $ 171,830 $ 258,339 $ 428,418 $ 708,681
Cost of goods sold 329,332 402,476 749,123 910,639
----------- ----------- ----------- -----------
GROSS LOSS (157,502) (144,137) (320,705) (201,958)
----------- ----------- ----------- -----------
Selling, general and
administrative expenses 436,977 551,625 849,937 1,079,119
Research and development costs 349,652 413,621 721,614 871,695
----------- ----------- ----------- -----------
OPERATING LOSS (944,131) (1,109,383) (1,892,256) (2,152,772)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income - 3,674 - 5,499
Interest expense (218,920) (164,241) (426,397) (328,768)
Other (20,367) - (20,367) 1,023
----------- ----------- ----------- -----------
OTHER EXPENSE - NET (239,287) (160,567) (446,764) (322,246)
----------- ----------- ----------- -----------
NET LOSS $(1,183,418) $(1,269,950) $(2,339,020) $(2,475,018)
=========== =========== =========== ===========
Net loss per common share $ (.15) $ (.16) $ (.30) $ (.34)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 7,842,106 7,735,665 7,842,106 7,342,336
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
CARACO PHARMACEUTICAL LABORATORIES, LTD.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK SUBSCRIPTION
------------------------------------------ ---------------------------- RECEIVABLE
SHARES AMOUNT SHARES AMOUNT ------------
------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 285,714 $1,000,000 6,855,807 $17,545,401 $(14,087)
ISSUANCE OF COMMON STOCK
(UNAUDITED) -- -- 986,299 2,101,573 --
NET LOSS (UNAUDITED) -- -- -- -- --
------- ---------- --------- ----------- --------
BALANCE AT JUNE 30, 1996
(UNAUDITED) 285,714 $1,000,000 7,842,106 $19,646,974 $(14,087)
======= ========== ========= =========== ========
<CAPTION>
UNREALIZED LOSS ON
MARKETABLE
DEFICIT SECURITIES TOTAL
----------------- ---------------------- -------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $(18,232,364) $(160,924) $ 138,026
ISSUANCE OF COMMON STOCK
(UNAUDITED) -- -- 2,101,573
NET LOSS (UNAUDITED) (2,475,018) -- (2,475,018)
------------ --------- ----------
BALANCE AT JUNE 30, 1996
(UNAUDITED) $(20,707,382) $(160,924) $ (235,417)
============ ========= ==========
<CAPTION>
PREFERRED STOCK COMMON STOCK
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 285,714 $1,000,000 7,842,106 $19,646,974
Preferred dividend (unaudited) -- -- -- --
Receipt of common stock subscription
receivable (unaudited) -- -- -- --
NET LOSS (UNAUDITED) -- -- -- --
------- ---------- --------- -----------
BALANCE AT JUNE 30, 1997 (UNAUDITED) 285,714 $1,000,000 7,842,106 $19,646,974
======= ========== ========= ===========
<CAPTION>
SUBSCRIPTION ACCUMULATED
RECEIVABLE DEFICIT TOTAL
------------- -------------- -------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 $(14087) $(23,731,296) $(3,098,409)
Preferred dividend (unaudited) -- (30,000) (30,000)
Receipt of common stock subscription
receivable (unaudited) 14,087 -- 14,087
NET LOSS (UNAUDITED) -- (2,339,020) (2,339,020)
------- ------------- -----------
BALANCE AT JUNE 30, 1997 (UNAUDITED) $ -- $(26,100,316) $(5,453,342)
======= ============= ===========
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE> 6
CARACO PHARMACEUTICAL LABORATORIES, LTD.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1 9 9 7 1 9 9 6
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,339,020) $(2,475,018)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 243,900 256,200
Changes in operating assets and liabilities
which provided (used) cash:
Accounts receivable (57,664) 204,357
Inventories (96,895) 74,003
Prepaid expenses and deposits 110,169 (79,477)
Accounts payable 3,117 (71,932)
Accrued expenses 387,923 120,771
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,748,470) (1,971,096)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plan and equipment (2,394) (56,539)
Proceeds from sale of marketable securities 61,913 -
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 59,519 (56,539)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 2,101,573
Repayments of long-term debt - (120,000)
Net short-term borrowings 1,735,000 -
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,735,000 1,981,573
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 46,049 (46,062)
Cash and cash equivalents, beginning of period 15,421 332,264
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 61,470 $ 286,202
=========== ===========
Supplemental disclosures of cash flows information:
Cash paid for interest $ 451 $ 164,241
=========== ===========
</TABLE>
6
See accompanying notes.
<PAGE> 7
1. BASIS OF PRESENTATION
The balance sheet as of June 30, 1997 and the related statements of
operations, stockholders deficit and cash flows for the six months ended
June 30, 1997 and 1996 are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted of only normal
recurring items. Interim results are not necessarily indicative of
results for the full year.
The financial statements as of June 30, 1997 and for the six months ended
June 30, 1997 and 1996 should be read in conjunction with the financial
statements and notes thereto included in the Corporation's Annual Report
on Form 10-KSB for the year ended December 31, 1996.
The accounting policies followed by the Corporation with respect to the
unaudited interim financial statements are consistent with those stated
in the 1996 Caraco Pharmaceutical Laboratories, Ltd. Annual Report on
Form 10-KSB.
The accompanying financial statements have been prepared assuming that
the Corporation will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal
course of business.
The Corporation has not currently achieved sales necessary to support
operations. The Corporation has, as of June 30, 1997, stockholders'
deficit of $5,453,342 and working capital deficit of $13,596,192.
Realization of a major portion of the assets is dependent upon the
Corporation's ability to meet its future financing requirements and the
success of future operations, the outcome of which cannot be determined
at this time. These and other factors, including being in default of the
debt agreement with the Economic Development Corporation (EDC) of the
City of Detroit (see Note 4), raise substantial doubt about the
Corporation's ability to continue as a going concern in the absence of
sufficient additional funds and the achievement of profitable operations.
The accompanying financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying
amounts or the amount of liabilities that might be necessary should the
Corporation be unable to continue as a going concern.
Management's plans with regard to these matters include:
* An attempt to raise up to $7,500,000 in gross proceeds from the
sale of its common stock (see below). If the Corporation is unable
to raise approximately $7,500,000 it may have an adverse effect on
the Corporation's ability to execute its business plan through 1997.
There can be no assurance that adequate capital can be obtained.
* Continued development of strategic alliances with other drug
manufacturers whereby the Corporation will, subject to approval of
ANDA's, manufacture on behalf of the participating entity for a fee
(cash or common shares - see below) or, manufacture on its own
behalf and pay the participating entity a royalty based on sales.
7
<PAGE> 8
1. BASIS OF PRESENTATION (CONTINUED)
On July 11, 1996, the Corporation and an Indian specialty pharmaceutical
company, Sun Pharmaceutical Industries Ltd. ("Sun Pharma") announced that
they had signed two non-binding letters of intent pursuant to which Sun
Pharma would make an initial investment in Caraco common stock and sell
it certain rights for a number of generic pharmaceuticals products. As
revised in the most recent proposal, it is contemplated that a) in
exchange for 5,300,000 shares of Caraco common stock Sun Pharma will
invest $7,500,000 to be received by the Corporation over a period of one
year in four installments, b) the number of products to be sold to the
Corporation by Sun Pharma is 25 over a period of five years in exchange
for 544,000 shares of Caraco common stock to be issued for each product
and c) two current Caraco shareholder directors will each contribute to
the Corporation the equivalent of up to $500,000 in cash or in shares of
Caraco common stock, not to exceed 250,000 shares each. Consummation of
this transaction is subject to certain conditions, including completion
of Sun Pharma's due diligence, clearance from various agencies in the
Indian government, approval of any EDC modification of debt to Caraco
(see Note 4), and negotiation and execution of definitive documents.
Negotiations are continuing at this time.
If the completion of the agreement with Sun Pharma does not occur and the
Corporation does not receive the anticipated equity capital, it is
expected that the Corporation would immediately commence bankruptcy
proceedings pursuant to Chapter 7 of the Federal Bankruptcy Code of 1978,
as amended.
2. LOSS FROM DEFALCATION
During the year ended December 31, 1994, the Corporation determined that
approximately $514,000 of Corporation funds had been misappropriated by
the Corporation's former controller, a son of the Corporation's former
Chairman Emeritus. The misappropriations occurred during the period from
January through June of 1994. The Corporation's former Chairman Emeritus
reimbursed the Corporation the $514,000. In connection with this matter,
approximately $56,000 in certain legal and other expenses incurred by the
Corporation in conducting an investigation into this matter were paid
directly by the former Chairman Emeritus from his personal funds.
The Corporation has made filings about this matter with the Securities
and Exchange Commission (SEC). The SEC is currently conducting an
investigation into the matter. On November 1, 1996, the Corporation,
through its legal counsel, was notified by the SEC that its Enforcement
Division has tentatively decided not to recommend that the commission
authorize an enforcement action against the Corporation. The SEC further
advised that it nevertheless was possible that an action against the
Corporation may ultimately result from the investigation. The SEC's
investigation had revealed that the defalcation which was reported
October 18, 1994 had also occurred in 1993, as well as in the first half
of 1994, and that the 1993 defalcation had totaled at least an additional
$300,000. It is also possible that the Commission might institute an
enforcement proceeding against one or more former employee(s) of the
Corporation who are no longer associated with the Corporation.
3. SHORT-TERM DEMAND NOTES
The Corporation has borrowed an additional $1,800,000 during the period
January 1, 1997 through June 30, 1997 from two (2) shareholder directors
and Sun Pharma. The notes accrue interest at 10%, are secured by
specific assets of the Corporation and are due on demand or on the one
year anniversary of the closing date.
8
<PAGE> 9
4. SUBSEQUENT EVENTS
On August 5, 1997 the Corporation entered into an agreement with the EDC
to modify certain terms and conditions related to the $8,880,000 debt
presently in default. In general, the agreement provides for the
deferral of scheduled principal and interest payments until February
1999, at which time such payments will commence in accordance with the
terms of the agreement. In turn the EDC obtains additional collateral as
security for the debt.
Short-term demand notes of approximately $2,000,000 are in the process of
being restructured. The revised terms currently provide for the
principal to be due August 1, 1999 with interest at 10% to be prepaid in
exchange for an equivalent number of shares of common stock of the
Corporation at $1.50 per share.
Subsequent to June 30, 1997, Sun Pharma loaned the Corporation an
additional $650,000. A portion of this debt along with previous loans
of $500,000 are expected to be converted to equity during the quarter
ended September 30, 1997.
All of the above transactions will take effect only upon the consummation
of the proposed transaction between the Corporation and Sun Pharma as
discussed in Note 1.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Sales
Net sales for the periods ended June 30, 1997 and 1996 were $171,830
and $258,339, respectively. The decrease of 33% in sales is directly
attributable to the current generic pharmaceutical market conditions,
which forced the Corporation to lower the price of its products to
remain competitive. It is anticipated that the current depressed level
of sales will continue for the indefinite future due to the
Corporation's limited product base.
The Corporation anticipates increased sales volume from three (3) ANDAs
currently in various stages of the FDA approval process. The first two
of these ANDAs, Metoprolol Tartrate and Paraomoycin Sulfate, which were
approved in December 1996 and June 1997, respectively, are expected to
contribute sales by the end of 1997. The Corporation continues to
pursue logical extensions of its current product line as well as search
for strategic alternatives to improve its financial condition and top
line growth.
Cost of Sales
Cost of sales for the periods ended June 30, 1997 and 1996 were
$329,332 or 191.6% of sales and $402,476 or 155.8% of sales,
respectively. The increased percentage in cost of sales was a result
of the Corporation's inability to purchase raw materials and bulk
product from its suppliers at favorable economic quantity and price.
Due to inadequate capital funds, the Corporation was unable to maintain
adequate levels of production and as a result, was not able to absorb
the Corporation's fixed production costs.
General and Administrative
Selling, general and administrative expenses for the periods ended June
30, 1997 and 1996 were $436,977 and $551,625, respectively. The
decease of 21% is primarily related to the Corporation's cost
containment
9
<PAGE> 10
program implemented in 1995 in response to the
Corporation's losses and industry trends.
The Corporation continues to implement measures to further reduce costs
and improve operating efficiencies. In addition, a salary reduction of
management and officers of 15% and 25% respectively was implemented
during the six months ended June 30, 1997 and there has been a 30%
reduction in the Corporation's employees.
Research and Development
Product development expenses for the periods ended June 30, 1997 and
1996 were $349,652 and $413,621, respectively, demonstrating Caraco's
continued commitment to new product development as a means to increase
and diversify its product offering despite the Corporation's current
financial condition. The Corporation plans to continue to expand
product development activities as its resources permit as it believes
such efforts are vital to expanding the Corporation's product line and
generating future products. In December 1996 and June 1997, the
Corporation was notified of ANDA approvals on Metoprolol Tartrate and
Paromomycin Sulfate. These products are now in product validation and
the early stages of market development. While there can be no
guarantee, the Corporation anticipates FDA approval for an additional
ANDA in 1997.
Results of Operations
Operating losses for the periods ended June 30, 1997 and 1996 were
$1,183,418 and $1,269,950, respectively. The operating losses are
directly related to net sales which were inadequate to absorb the fixed
costs of the Corporation's operational expenses. A number of
uncertainties exist that may influence the Corporation's future
operating results. These uncertainties include general economic
conditions, changes in conditions affecting the pharmaceutical industry
primarily related to intensified generic drug competition, the
Corporation's success in developing and marketing new products,
manufacturing performance, availability and price fluctuations of raw
materials, FDA regulations and other factors. These competitive
pressures as well as costs required to comply with FDA and CGMP
requirements will effect the Corporation's ability to reach
profitability.
Interest Expense
Interest expense, which is incurred primarily in connection with the
Corporation's mortgage obligation to the Economic Development
Corporation of Detroit, was $218,920 and $164,241 for the periods ended
June 30, 1997 and 1996, respectively. The increase in interest expense
relates to an increase in short-term loans from three (3) shareholder
directors and Sun Pharma used to finance the Corporation's short-term
cash requirements during ongoing negotiations with the Economic
Development Corporation of Detroit and Sun Pharmaceuticals.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources
At June 30, 1997, the Corporation's working capital deficit was
$13,596,192. The deficit in working capital is directly attributed to
the Corporation's continued losses from operations and the
classification of the entire EDC loan as current, resulting from being
in default.
Management estimates that, at its currently planned and anticipated
level of operations, the Corporation will experience continued
operating losses in 1997, and accordingly, will require approximately
$7,500,000 of additional funds to execute its business expansion plan
and fund continuing operations on a going forward basis.
The Corporation has no material commitments for capital expenditures.
On July 11, 1996, the Corporation and an Indian specialty company, Sun
Pharmaceutical Industries, Ltd. ("Sun Pharma") announced that they had
signed two non-binding letters of intent pursuant to which Sun Parma
would make an initial investment in Caraco common stock and sell it
certain rights for a number of generic pharmaceutical products. As
revised in the most recent proposal, it is contemplated that (a) Sun
Pharma will invest $7,500,000 to be received by the Corporation over a
period of one year in four installments, (b) the number of products to
be sold to the Corporation by Sun Pharma is 25 over a period of five
years in exchange for 544,000 shares of Caraco common stock to be
issued for each product and (c) two current Caraco shareholder
directors will each contribute to the Corporation up to $500,000 in
cash or common stock of Caraco, not to exceed 250,000 shares. The
price will be determined at the midpoint of the bid and ask price at
the closing on the day of contribution. This transaction is subject to
certain conditions, including completion of Sun Pharma's due diligence,
clearance of various agencies in the Indian government, approval of any
EDC modification of debt to the Corporation, and negotiation and
execution of definitive documents.
If the completion of the agreement with Sun Pharma does not occur and
the Corporation does not receive the anticipated equity capital, it is
expected that the Corporation would immediately commence bankruptcy
proceedings pursuant to Chapter 7 of the Federal Bankruptcy Code of
1978, as amended.
There is no assurance that the foregoing funds will be made available
to the Corporation timely or on financially satisfactory terms; or that
any of the Corporation's ANDAs will be approved by the FDA within time
parameters anticipated by management or at all, or that the Corporation
will be able to manufacture in commercial quantities and sell
profitably any product resulting from FDA approval of an ANDA filed by
the Corporation. To the extent that capital requirements should exceed
available capital, the Corporation will be required to reduce its
research and development activity, further reduce personnel and delay
capital expenditures while continuing to seek alternative sources of
financing for its business. There is no assurance that alternative
sources of financing will be available.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders (the "Meeting") of Caraco
Pharmaceutical Laboratories, LTD. was held on June 25, 1997 at Detroit,
Michigan. Matters voted on at the Meeting and the votes cast for, against or
abstained were as follows:
A. Election of Directors
---------------------
Votes For Votes Withheld
--------- --------------
Jay F. Joliat 4,146,972 1,456,123
William R. Hurd 4,136,747 1,466,348
Approval of increase of the number of shares authorized to be issued
under the 1993 Stock Option Plan
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
5,437,429 199,037 22,325
Approval of Amendment to the Corporation's Amended and Restated Articles
of Incorporation increasing authorized common shares from 20,000,000 to
30,000,000.
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
5,437,429 149,471 16,195
12
<PAGE> 13
ITEM 5. OTHER INFORMATION
At a meeting on June 25, 1997 the Board of Directors unanimously adopted
resolutions reorganizing and reconstituting membership in the standing
committees of the Board of Directors as follows:
Name of Committee Members Appointed
----------------- -----------------
Audit David W. Adamany
David A. Hagelstein
John R. Morris
Compensation David W. Adamany
Cara J. Curry
David A. Hagelstein
Finance Cara J. Curry
Jay F. Joliat
Phyllis Harrison-Ross
Executive William R. Hurd
Jay F. Joliat
John R. Morris
On July 9, 1997 Caraco announced that it had received conditional approval
from the EDC and the City Council of Detroit for the deferment of Caraco's
present HUD mortgage loan administered through the EDC. The agreement allows
Caraco to postpone payments until February 1999 or sooner if Caraco reaches
certain profitability levels (see EXHIBIT 99).
On August 5, 1997 the corporation entered into an agreement with the EDC
to modify certain terms and conditions related to the $8,880,000 debt presently
in default. In general, the agreement provides for the deferral of scheduled
principal and interest payments until February 1999, at which time such
payments will commence in accordance with the terms of the agreement. In turn
the EDC obtains additional collateral as security for the debt.
Short-term demand notes of approximately $2,000,000 are in the process of
being restructured. The revised terms currently provide for the principal to
be due August 1, 1999 with interest at 10% to be prepaid in exchange for an
equivalent number of shares of common stock of the Corporation at $1.50 per
share.
Subsequent to June 30, 1997, Sun Pharma loaned the Corporation an
additional $650,000. A portion of this debt along with previous loans of
$500,000 are expected to be converted to equity during the quarter ended
September 30, 1997.
All of the above transactions will take effect only upon the consummation
of the proposed transaction between the corporation and Sun Pharma as discussed
in Note 1 of the financials.
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS
a. The following exhibit is filed as part of this report and
is attached hereto:
EXHIBIT 27 - Financial Data Schedule
b. There were no Form 8-K's filed during the second quarter of
1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARACO PHARMACEUTICAL LABORATORIES, LTD.
By:/s/Allan J. Hammer
----------------------------------
Allan J. Hammer
Chief Financial Officer (Principal
Accounting Officer and a duly
authorized signatory of the Company)
DATED: August 13, 1997
14
<PAGE> 15
EXHIBIT INDEX
EXHIBIT TABLE
NUMBER EXHIBIT PAGE
- --------------------------------------------------------------------------------
27 Financial Data Schedule
99 Press Release dated July 9, 1997
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 61,470
<SECURITIES> 34,174
<RECEIVABLES> 185,005
<ALLOWANCES> 30,000
<INVENTORY> 387,160
<CURRENT-ASSETS> 697,083
<PP&E> 10,610,216
<DEPRECIATION> 2,501,540
<TOTAL-ASSETS> 8,839,933
<CURRENT-LIABILITIES> 14,293,275
<BONDS> 0
0
1,000,000
<COMMON> 19,646,974
<OTHER-SE> (26,100,316)
<TOTAL-LIABILITY-AND-EQUITY> 8,839,933
<SALES> 428,418
<TOTAL-REVENUES> 428,418
<CGS> 749,123
<TOTAL-COSTS> 749,123
<OTHER-EXPENSES> 1,571,551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (426,397)
<INCOME-PRETAX> (2,339,020)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,339,020)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,339,020)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> 0
</TABLE>
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EXHIBIT 99
FOR IMMEDIATE RELEASE CONTACT: WILLIAM R. HURD
(313) 871-8400
CARACO ANNOUNCES AGREEMENT
Detroit, MI, July 9, 1997 -- Caraco Pharmaceutical Laboratories, Ltd.
(Bulletin Board: CARA) today announced that it has received conditional
approval from the Economic Development Corporation (EDC) and the City Council
of Detroit for the deferment of Caraco's present HUD mortgage loan administered
through the EDC. The agreement allows Caraco to postpone payments until
February 1999 or sooner if Caraco reaches certain profitability levels.
This agreement, if finalized, will enable Caraco to proceed with the Sun
Pharma of India transactions. Upon final approval by the Reserve Bank of India
(RBI), Sun Pharma has agreed to provide a cash and technology infusion to
Caraco for the development of future products and on-going operations in
exchange for 5.3 million shares of Caraco common stock at closing and up to an
additional 13.6 million shares over a five year period if certain conditions
are satisfied. The final agreements are anticipated to be consummated in
August. Either party may terminate at any time prior to closing.
William R. Hurd, President and Chief Operating Officer, stated that "We
are extremely pleased with this conditional approval by the EDC and the City of
Detroit, If consummated, the agreement between Caraco and Sun Pharma will
enable Caraco to continue the progress it has made in developing products for
the pharmaceutical market and will provide us with a valuable technological
resource through the Sun Pharma product development network. The Capital and
Technology infused will help the corporation to meet current and future goals".
Sun Pharma is a highly integrated pharmaceutical company specializing in
active substance manufacturing, pharmaceutical development, and marketing. It
has a strong market base with products in neurology and psychiatry, cardiology,
gastroenterology, oncology, and anti-infectives.
Caraco Pharmaceutical Laboratories, Ltd., is engaged in the developing,
manufacturing, and marketing generic drugs for the ethical and over-the-counter
markets. Among Caraco's products are Nifedipine, a calcium channel blocker for
the cardiovascular market; SureLac(TM), a lactase enzyme tablet which permits
enjoyment of dairy products without discomfort; Metoprolol Tartrate Tablets,
for the cardiovascular market; and additional products used for pain relief,
infection, and coughs and colds.
